Another quarter, another urge to look to the future from A123 Systems (Nasdaq: AONE).

The Massachusetts-based battery company today reported third quarter revenue of $26.2 million, an increase of $23.6 million, and reiterated an alliance to produce car batteries for the Shanghai Automotive Industry Corp.

That was the good news. Here's the bad news. Losses increased to $43.7 million over $22.8 million from the same period the year before. More ominous, product shipments are dropping. The company shipped the equivalent of 15.8 million watt hours of batteries in the quarter, down from 17.1 million in the same quarter a year ago. Shipments for the first three quarters have dropped to 44.2 million watt hours compared to 44.8 million for the first nine months of 2009.

Product revenue in the quarter dropped from $19 million to $20 million a year ago. The bump in revenue came from a rise in revenue from service projects.

The Fisker Karma comes out later this year and will be powered by A123 Systems batteries. What do these shipments mean for the Karma, which has been delayed from late 2009, to September 2010 to sometime soon. Transportation revenue grew to $9.5 million from $8.3 million in the quarter, but has declined to $30 million from $34 million for the first three quarters.

Last quarter, the company stated that it is dropping out of a project to supply batteries to Fiat/Chrysler for electric cars and urged investors to look to the future. (Not the three months away future. The future.)

Last year, A123 lost out on the GM Volt contract, and longtime customer Black and Decker began to phase out incorporating A123 batteries in its power tools.

The company is also experiencing increased competition from other companies. Phil Gow, vice president of battery systems at Coda Automotive, told us at The Networked EV yesterday that Lio Energy Systems, Coda's sister battery company, can make batteries for $500 a kilowatt hour. Tesla Motors (Nasdaq: TSLA) CEO Elon Musk recently told us that his company can produce battery packs for less than $700 to $600 a kilowatt hour. The quote is in the first video, the Zapruder film of EV videos.

Charlie Vartanian, an A123 exec speaking at the Emerging Technologies Summit in Sacramento this week, said that A123 was approaching the $1000 per kilowatt mark when talking about grid storage battery packs. It's not a direct comparison, but it underscores the challenges.

Disclosure: I've been somewhat skeptical of A123 for some time, so I stand accused of sometimes taking a more critical slant on this topic than other reporters. But those are the numbers.

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